I'm back, wish I'd never left

I'm back in at 29.43 today, I wish I'd never left. I've missed all kinds of BV gains and dividends in my long abscence away from mREITS. I also opened a new WMC position today. I hope for some great opportunistic event driven trades around the current fiscal cliff and the debt ceiling debate coming this spring. My best opportunistic upcoming investments won't be through a brokerage, it will be in buying around 10 brand new various makes of Evil Black Guns on the threat of new communist gun control laws being enacted.

I sold all my AGNC shares today at $32.43. I bought these in late December at $29.43. I typically consider taking swing trade profits with gains =2*div, and my $3.00 gain exceeded my $2.50 threshold. It also exceeded my traditional threshold of double the old $1.40 div that I used when I traded AGNC back in the day.

AGNC did fine in 2012, but now that they're a large cap it's hard for them to find "pockets of value" in which to deposit their excellent asset selection skills. When they were growing from small cap to mid cap they got right down to nitty gritty, almost individual loan level, analysis. They are masters of researching and discounting the motivations of all the OAS players, who consist of borrowers, the different loan servicers, the FHA, the GSEs, Congress, the Fed etc.... They follow the news, earnings, and press releases very carefully. They get inside all the player's heads, put it all together under different scenarios, and amazingly they get it right every time. When they were a small cap it was easy for them to opportunistically capitalize on their astute relative valuation views. Back then every derivative trade they made was a derivative of a real security. Back then they could change their battle formation almost instantly using what they called "supplemental hedges". The difference now that they are a large cap is that it's harder for them to capitalize on their fantastic asset selection skills. Dollar rolling TBA's and shorting UST's are the types of blunt instruments that they are now limited to using, because those kinds of extremely liquid instruments are available in quantities meaningful to a large cap like AGNC.

But they are still one of the most shareholder friendly, extra detail disclosing, and honest companies that I know of. I have utmost faith in management and I have confidence that they will not suffer a deadly margin call meltdown no matter where rates go from here. I'll gratefully buy in again if it trades under $30, and I'll keep right on buying all the way down if we have a flash crash.

Nice trade. I closed out my AGNC calls last week as well. I'm in YBF's camp that AGNC (like MTGE) will issue shares between now and the March X-d, should the pps provide accretive cover. I had previously calculated a pps of circa 33 to trigger such an event, but my back of the envelope calcs suggest that MTGE may have paid a smaller than "historic" subscriber discount for its recent SPO. If this is the case, and AGNC is able to benefit from a reduced subscriber discount, then pps may only need a couple of dimes from here to pull the trigger.

Ergo, I'm on the sidelines for the next few days to see if an SPO materializes. With or without an SPO, I'll re-enter an AGNC trade (calls), betting that the traditional dividend run will overpower the negative macro environment portended by the implementation of sequestration. With the potential for a short term price disruption, I'll probably go longer, possible the Roys. We'll see.

I hope that life has been good, and that you have been enjoying your brother's excellent tunes. Quite an interesting investing landscape with the FC AND the Federal Debt Limit in the crosshairs.
I was recently thinking about some of the old DD, and was a pleasure to see your name on this post. Let's make some money in 2013.

I did my usual today, bought 40 contracts of 2015 Roy for $4.30. I have never paid that much for Roy before, but then again BV has grown more than 10% since last time I traded AGNC. Merill Ross estimates that the next reported BV will be ~$32 so I'm looking at a quick safe 1.6x bagger if she's right about BV and trades at reported BV in the 1H 2013. I am counting on GK's great hedging ability and opportunistic trading skills to grow BV despite the wild interest rate volatility that I expect to see in 2013 once the debt ceiling debate gets nasty again. If it weren't for my faith in GK I wouldn't touch anything leveraged to bonds when yields are this low. I am hoping for a bond market freakout on the threat of strategic default giving AGNC the volatile rate environment that they thrive in. TNX-IRX=16.45 today, and it's lived below 20 for most of 2013, welcome to Japan.

Doc, I'm still here in PT, Roy paid of the mortgage for me and there's no place like home. Every time I leave for a few months in the winter I'm so glad to return. I trust you're rolling on your Blizzaks and toughing it out too?

You have been greatly missed Taymere. I am also in WMC with you. I wish you much success and a Happy New Year. Did you ever buy the home in Florida, or are you writing from the West Coast, or both? If so don't let the Gestapo Seattle Reich here about the heaters...they are better tolerated in Florida...;-)

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